Recent developments in Spain have opened an important opportunity for non-resident individuals who own assets located in the country and have paid Spanish Wealth Tax in recent years. A new interpretation by the Spanish Supreme Court confirms that non-residents must be allowed to benefit from the same protective mechanisms that the Wealth Tax law grants to Spanish tax residents. As a result, many non-resident taxpayers may now be entitled to recover part of the Wealth Tax paid in the last four years, provided that their tax burden exceeded the maximum level permitted by Spanish law.
To understand why this change is so relevant, it is essential to explain the concept of the “joint limit” (“límite conjunto”). Spanish legislation establishes that a taxpayer’s Wealth Tax liability cannot become excessive in relation to the individual’s income for the same year. The law provides that the total Wealth Tax due, when added to the Personal Income Tax, may not exceed 60% of the taxpayer’s taxable income. If this threshold is exceeded, the Wealth Tax must be proportionally reduced. This mechanism is intended to ensure that taxpayers are not forced to use their capital or savings merely to pay the tax, preserving the constitutional principle that taxation must reflect the taxpayer’s true economic capacity.
For many years, the Spanish Tax Administration applied this limit exclusively to individuals who were tax residents in Spain. Non-residents —who are taxed only on the assets they hold within Spanish territory— were excluded from the benefit, even though the Wealth Tax could represent a disproportionately high burden when compared to the income they earned either abroad or in Spain. The Supreme Court has now confirmed that this distinction between residents and non-residents is not justified. Non-residents are subject to the same Wealth Tax on the mere ownership of assets in Spain, and therefore they must be granted equal access to the joint limit, regardless of whether they file a Spanish Personal Income Tax return.
This shift has significant practical consequences. If you are a non-resident who owns Spanish real estate or other taxable assets and have paid Wealth Tax in the last four years, your tax burden may have exceeded what the law ultimately allows once the joint limit is applied. In such cases, you may have overpaid the tax and could be entitled to request a refund. The process involves filing a request to amend the original Wealth Tax return, recalculating your liability after applying the joint limit and demonstrating the income obtained during the relevant year, whether in your country of residence or, where applicable, in Spain through the Non-Resident Income Tax.
Given that refund claims are only possible for non-prescribed years, usually limited to the previous four tax years, affected taxpayers should act promptly. The potential amounts involved can be significant, particularly for individuals who own high-value real estate in Spain but earn most of their income abroad. For this reason, it is advisable for non-residents to review their Wealth Tax filings and assess whether the amount paid in Spain may exceed the ceiling established by the joint limit.
In conclusion, if you are a non-resident and suspect that your Wealth Tax liability in Spain may have been disproportionately high compared to your income level, you may be entitled to recover part of the tax paid. The recent interpretation of the law provides a clear legal basis to request these refunds, making this an opportune moment to revisit prior filings and determine whether corrective action is appropriate.
By Javier Prieto
Partner – Tax Department
